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Old 17.04.2015, 09:04
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any UK tax implications

A question for the financial guru's as my attempts to read the clear as mud guide from HMRC left me stumped.

My sister in England, and my wifes mother in Scotland are both elderly and UK citizens, and as part of putting there affairs in order wish to transfer ownership of their properties to us now. They don't want to sell the properties but gift them, and it's not an attempt to fudge potential long term care issues, more to simplify and cheapen the probate issues, and they would both have tenancy in perpetuity written into any agreement.

I think is that the transaction for the change of ownership is straight forward, and that the values of the properties would be declared on our tax return here as worldwide assets and taxed accordingly. Down the road should the worst happen the properties would most likely be retained and rented out, or could be sold as circumstance dictate.

Could someone advise:
- if I have the right handle on this,
- if there is a time limit for the future regarding claw back of the value should they need long term care in a home,
- and the tax position on potential future rental income and tax liabilities should we sell them.

Neither property will ever have been our primary residence, and for the foreseeable future we will be Swiss resident.

Many thanks
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Last edited by Papa Goose; 17.04.2015 at 11:08.
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Old 17.04.2015, 11:45
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Re: any UK tax implications

I think the person giving has to survive for at least 7yrs to be shot of any tax.

The the local authorities would not look favourably on the situation if they tried to shortly claim on the NHS for a care home, not long after giving their houses away.

Interesting source: http://citywire.co.uk/money/can-i-gi...ce-tax/a589586
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Old 17.04.2015, 11:55
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Re: any UK tax implications

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I think the person giving has to survive for at least 7yrs to be shot of any tax.

The the local authorities would not look favourably on the situation if they tried to shortly claim on the NHS for a care home, not long after giving their houses away.

Interesting source: http://citywire.co.uk/money/can-i-gi...ce-tax/a589586
note if they continue to live in the house for free, it will be a gift with reservation of benefit and there is no 7 year get out for paying the IHT.
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Old 17.04.2015, 12:42
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Re: any UK tax implications

For a Swiss resident who owns property abroad, the following links may be helpful. A very short summary is that, in general, your income/wealth abroad should be reported to the Swiss tax authorities for the purposes of determining your percentage Tax rate, but is not, itself, taxed here.

Swiss TAX Return and Property Income from the UK and UK Tax Return

Capital gains tax rule in CH for sale of a UK property?


(Ger PDF) http://www.meng-partner.ch/fileadmin...enschaften.pdf
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Old 17.04.2015, 13:10
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Re: any UK tax implications

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A question for the financial guru's as my attempts to read the clear as mud guide from HMRC left me stumped.

My sister in England, and my wifes mother in Scotland are both elderly and UK citizens, and as part of putting there affairs in order wish to transfer ownership of their properties to us now. They don't want to sell the properties but gift them, and it's not an attempt to fudge potential long term care issues, more to simplify and cheapen the probate issues, and they would both have tenancy in perpetuity written into any agreement.

I think is that the transaction for the change of ownership is straight forward, and that the values of the properties would be declared on our tax return here as worldwide assets and taxed accordingly. Down the road should the worst happen the properties would most likely be retained and rented out, or could be sold as circumstance dictate.

Could someone advise:
- if I have the right handle on this,
- if there is a time limit for the future regarding claw back of the value should they need long term care in a home,
- and the tax position on potential future rental income and tax liabilities should we sell them.

Neither property will ever have been our primary residence, and for the foreseeable future we will be Swiss resident.

Many thanks
Unless they pay a market rent there is no IHT saving, otherwise everybody would do it. They should take legal independent advise before doing so, if you were to get divorced, then you might loose half the asset, so they would become homeless.

Any rental income will become your liability, from this year if non resident there is no UK tax allowance for that income. You will be liable to UK CGT from the date of the gift, you need to get a valuation done for CGT purposes. What you don't know is what future IHT & CGT rates will be, so you cant know for sure which is the lower potential liability.
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Old 17.04.2015, 13:15
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Re: any UK tax implications

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Any rental income will become your liability, from this year if non resident there is no UK tax allowance for that income.
What do you mean by allowance?

Do you mean the Personal Allowance?
https://www.gov.uk/tax-uk-income-liv...onal-allowance
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Old 17.04.2015, 13:18
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Re: any UK tax implications

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What do you mean by allowance?

Do you mean the Personal Allowance?
https://www.gov.uk/tax-uk-income-liv...onal-allowance
Yes the personal allowance which for about the last 20 years ex pats could use against UK derived income. It looks like the change has not gone through yet.
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Old 17.04.2015, 13:30
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Re: any UK tax implications

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Yes the personal allowance which for about the last 20 years ex pats could use against UK derived income. It looks like the change has not gone through yet.
see my remarks on the other thread. the chancellor stated that no changes would be made before April 2017.

the PA is pretty generous, especially to expats and the amount has increased quite a bit in recent years.

for swiss resident brits, it makes UK property an almost unbeatable investment offering both leverage and tax exemption.
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Old 17.04.2015, 13:33
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Re: any UK tax implications

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see my remarks on the other thread. the chancellor stated that no changes would be made before April 2017.

the PA is pretty generous, especially to expats and the amount has increased quite a bit in recent years.

for swiss resident brits, it makes UK property an almost unbeatable investment offering both leverage and tax exemption.
However the income will be taxed in CH for residents assuming it's declared, so I don't believe a huge saving for the 120k plus a year crowd.
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Old 17.04.2015, 15:52
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Re: any UK tax implications

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I think the person giving has to survive for at least 7yrs to be shot of any tax.

The the local authorities would not look favourably on the situation if they tried to shortly claim on the NHS for a care home, not long after giving their houses away.

Interesting source: http://citywire.co.uk/money/can-i-gi...ce-tax/a589586
Third line:
This isn't a plan to fudge and long term care, as liquid assets would already preclude this. I know about the IHT clawback, it's the implication on wealth tax here on the asset value, and hopefully not for many moons but at some point the inevitable will happen, and the potential implication on rental income or sale proceeds

They want is to simplify the process, and ensure that chunks of there hard earned doest line the pockets of lawyers as they have both been told that the lawyers fee is based on the value of the estate.

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Any rental income will become your liability, from this year if non resident there is no UK tax allowance for that income. You will be liable to UK CGT from the date of the gift, you need to get a valuation done for CGT purposes. What you don't know is what future IHT & CGT rates will be, so you cant know for sure which is the lower potential liability.
Thats the sort of info FMF, thanks. Yes for sure a CGT valuation would be done at time of transfer, and I'm going back in May for a week and lawyers meetings have been scheduled, just want to gather information in advance.
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Old 17.04.2015, 18:35
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Re: any UK tax implications

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However the income will be taxed in CH for residents assuming it's declared, so I don't believe a huge saving for the 120k plus a year crowd.
Not so....the income is from immovable assets (house) in the UK, and under the Double Tax Treaty is taxable only in the UK. The tax actually payable may be zero in UK if the Personal Allowance is not taken up by other income.

It has to be declared in Switzerland for the purposes of calculating how far up the progressive tax rate you are....but you don't pay tax in Switzerland on it.
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Old 17.04.2015, 19:50
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Re: any UK tax implications

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Not so....the income is from immovable assets (house) in the UK, and under the Double Tax Treaty is taxable only in the UK. The tax actually payable may be zero in UK if the Personal Allowance is not taken up by other income.



It has to be declared in Switzerland for the purposes of calculating how far up the progressive tax rate you are....but you don't pay tax in Switzerland on it.

Double tax treaty means a credit not an exemption to tax in multiple jurisdictions.
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